Bible for business-site selectors overlooks Northwest

By almost any measure, Washington enjoys one of the best economies in America. The Northwest is coming out of the Great Recession. Even hard-hit Oregon is recovering.

But one wouldn’t know this reading the cover story of the latest issue of Site Selection magazine.

Measuring new plants and other facilities attracted by states in 2013, Site Selection ranks Texas No. 1, followed by Ohio, Illinois, Pennsylvania and Michigan. On a per capita basis, Nebraska led the list, followed by Ohio, Louisiana, Kentucky and Kansas.

No state in the Northwest made the top 10 of either ranking. Compared with 657 projects bagged by the Lone Star State, Washington pulled in 29, followed by Oregon at 24, Idaho at 15 and Alaska at 4.

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The Internet is not lacking lists. But Site Selection is an influential trade publication, especially with the priesthood of site-selection professionals, often compensated for finding the cheapest location and best incentives.

Over the past several days, newspapers have trumpeted their state’s ranking or worried that they are not playing in the big leagues.

All of which led me down the rabbit hole into what Bruce Kendall, president and CEO of the Economic Development Board for Tacoma-Pierce County, calls “the strange and curious” world of professional site selection.

I was especially curious as to whether, or how much, these rankings mattered. After all, Boeing’s investment of $4 billion to build the composite wing for the 777X in Everett counts for far more than a new data center in North Carolina.

Suzanne Dale Estey, interim CEO of the Economic Development Council of Seattle and King County, said, “The region has had some huge wins in recent months, including final assembly of the 777X and the continued expansion of Amazon.”

Eric Schinfeld, president of the Washington Council on International Trade, told me, “Our region and state’s economic-development focus is different from some of these other places. We’re much more focused on retention and growth of our incumbent companies, than adding the most new corporate headquarters.“

Site Selection’s criteria were a minimum capital commercial investment of $1 million, 20,000 square feet or more of new construction, or the creation or 50 or more new jobs.

Kendall, who has 25 years of experience in economic development, calls it a “legitimate process, but one that tends to rank highly low-cost and low-wage states. So those in the South and Midwest will do well. I’m not criticizing it at all, but it measures, say, a lot of data centers where they want plenty of land and state funds to defray costs.”

States such as Texas have large discretionary funds to defray the costs of projects large and small. That especially benefits rural areas with little economic-development capacity of their own.

“The biggest disadvantage to a Quincy or a Yakima is that the state doesn’t have a big war chest to spend $6 million at the governor’s discretion,” Kendall said.

Meanwhile, State Farm brought 1,100 new jobs to downtown Tacoma. That wouldn’t be counted because it moved into leased space.

Joshua Lehner, Oregon’s state economist, said, “To me, the proof is in the pudding. Most of those top states listed are middle of the pack to the bottom rung in terms of actual job growth.”

For example, looking at 2000-2013 job growth, Washington is 15th best and Oregon is 25th. Washington has more than made up its job losses from the Great Recession.

Back to the Site Selection story, Lehner said, “If this is a good predictor of future success, then yeah, that’s a concern.” But announced projects don’t always happen. Or a first phase might be built but future expansions never come about.

Texas’ economic success is the topic of much bragging, especially as Gov. Rick Perry feels out another run for the presidency. Some economists have said the Texas combination of low taxes and light regulation could be a model for other states.

The reality is different, as shown in an insightful article by Phillip Longman in Washington Monthly. Aside from its huge population (26 million), Texas has benefited from new oil plays. Indeed, the oil industry is more important there now than 20 years ago.

Tax policy in the Long Star State mostly benefits the rich and big companies. Meanwhile, Texas faces a host of social problems and has been falling behind in per capita income.

Interestingly, the net domestic migration of native-born Americans there is relatively small. So the notion that Americans are abandoning high-tax states such as California for Texas in large numbers is a myth.

With the 777X, Washington showed it could compete on incentives — $8.7 billion worth — where it mattered.

One spinoff from this win is the potential to create a carbon-fiber industry here. It also retained suppliers that might otherwise have moved.

Brian Bonlender, director of the Washington Department of Commerce, said the state is more interested in recruiting companies that will be here for the long haul. The goal is also “weeding out those that might pick up and leave after five years.”

One potential gain is a Chinese company, Northwest Innovation Works, looking to build plants in Washington and Oregon that would convert natural gas to methanol for export, replacing coal-derived methanol in China.

”We have a robust pipeline of companies we’re in serious talks with where Washington is on the short list,” Bonlender said.